How to Set Financial Resolutions for the Year and Achieve it?
Updated: Jan 13
by Lee Xin Hui, Rachel. |
Crunch is partnering with Hey Alfred - the smartest financial assistant app powered by Ai to help you track all of your financial assets; to bring you this series.
In this series, we want to provide you with helpful information to gain better financial literacy. Through this journey, you will learn how to manage your money better, save more and secure your finances for the future. If you often find yourself clueless on money matters like paying your first income tax, applying for loans or even how to save more without feeling miserable, this series is just for you.
We got your back. It’s time to take control of your #MoneyMatters.
The fresh start of another year calls for another set of resolutions. Physical health (ie clean eating, regular exercising, sufficient sleep) and emotional health (ie cutting off toxic relationships, spending time with yourself) are two common aspects people look into when listing down their new year resolutions. While they are undeniably useful for growth and self-development, financial health is equally important to sustain your lifestyle.
Here are three simple steps to guide you towards achieving financial health:
1. HAVE CLEAR AND ATTAINABLE GOALS
First, you have to know what you want. Take some time to reflect on what you want to achieve this year that requires financial planning, write them down and, detail how you would like to work towards achieving them. Then, set a timeline for your goals, decide if they’re short-term, mid-term, or long-term goals.
a) Short-term goals
Short-term goals are goals you want to achieve within 6 – 12 months, such as a vacation or renovating a home. Construct a simple breakdown of the expenses needed; for example, if you wish to spend 5 days in Bali, flight tickets inclusive of travel insurance cost around RM630. As flight tickets are always fluctuating, be sure to book them as soon as your savings reaches the price of the ticket!
Accommodation would roughly cost about RM400, if you’re one for more adventure, consider trying out lodging for backpackers so you can save more while satisfying your wanderlust. Other expenses such as transportation, meals, and leisure and entertainment will cost approximately RM170, RM200, and RM1600 respectively; which totals to RM3000.
Assuming your base salary is RM3000, you can set aside RM300 to RM600 monthly, and by the end of the year, you will be able to reward yourself with the much deserved holiday you saved up for!
Just a little reminder, do bear in mind the other liabilities and clear off any other short term debts as soon as possible, you wouldn’t want to go on a vacation with them creeping at the back of your head.
b) Mid-term goals
Depending on the amount, mid-term goals take up to 2 to 5 years to reach, like buying a car or paying off a bigger debt. An example would be paying off a car debt - a Perodua Myvi costs RM41,000 and after a down payment of 10% of that amount, you’re left with a RM36,900 debt to clear within 5 years.
With an additional 4% interest per annum, that means you would need to spend RM738 per month servicing the loan. Again, assuming you have a RM3000 base salary, 24.6% should be set apart for the loan and it’s important to treat your monthly repayments as a fixed expense of yours as it is important to commit to servicing these loans in a timely manner.
If paying off your car debt is one of your goals this year, check out Car Loan Repayment Calculator to help you calculate how much you should set aside monthly to check off a goal like this.
c) Long-term goals
Long-term goals are goals that require more than 5 years to achieve, such as a retirement fund or buying your first house. The mathematical rules are similar to the mid-term goals, just with greater costs and a longer repayment period.
Say you want to buy a RM500,000 house in 5 – 9 years, you will have to work towards a RM50,000 savings goal to afford the 10% downpayment. Setting aside RM500 – RM1000 for your monthly savings will enable you to achieve that goal in about 8 years’ time! When that’s settled, this home loan calculator can help calculate your monthly savings for servicing your mortgage.
That being said, long-term goals are affected by your changing short and mid-term goals, as well as your commitments in the interim; so, remember to be patient with them. It is always encouraging to set short-term goals first as reaching them can motivate you to reach your bigger and longer-term goals.
Pro-tip: Clear off your existing debts first so they don’t drag you in achieving your financial goals.
2. TRACK YOUR GOALS
Now that you have meticulously listed down your goals and plans to achieve them, make a point to track your progress so you don’t lose sight of the plot. Tracking your goals is not as hassling as it sounds, it can be as simple as setting a note on your calendar to check if you have reached your milestones, or if you’re more visually inclined, create your own spreadsheet tailored according to your preferred timeline.
If you want to go the extra mile, break down your daily transactions to get a more accurate monthly view of your expenses. When you make a habit to track your spending, it helps you save more in a year.
To save you from the hassle, Hey Alfred is a free app created to help you track your daily expenses and make smarter financial decisions.
3. AUTOMATE YOUR FINANCES
Automating your finances helps create a hassle-free, clear-minded environment which allows us to focus on achieving our financial resolution; there are several ways you can do so:
Try looking at tools that auto-deduct your bills - sometimes they give discounts and you get to keep a good credit score!
Automate your savings funds - keep aside a small amount every month, a little every month can go a long way.
Automate your investments – if you’re more financially savvy, look into an investment using Robo-advisory (an online financial advisor) players. It doesn’t take much to start investing! In fact, you can start by investing as low as RM100 monthly.
There you have it! Three steps to pave your way towards better financial health. Resolutions are created to guide you towards the things you want to achieve, and so it is important to take time and think through them carefully lest you risk overburdening yourself or giving up halfway. Hence, do keep in mind to set smart, realistic goals so that they are achievable and can propel you in working on your bigger goals.
You may find out more about Rachel on her Instagram too.